C.H. Robinson Reports Third Quarter Results Business Wire MINNEAPOLIS -- November 5, 2013 C.H. Robinson Worldwide, Inc. (“C.H. Robinson”) (NASDAQ:CHRW), today reported financial results for the quarter ended September 30, 2013. Summarized financial results for the quarter ended September 30 are as follows (dollars in thousands, except per share data): Three months ended September 30, Nine months ended September 30, 2013 2012 % 2013 2012 % change change Total revenues $ 3,316,665 $ 2,880,409 15.1 % $ 9,599,194 $ 8,388,237 14.4 % Net revenues: Transportation Truckload $ 265,509 $ 269,097 -1.3 % $ 798,448 $ 788,872 1.2 % LTL 61,436 58,863 4.4 % 180,638 167,135 8.1 % Intermodal 10,202 10,074 1.3 % 29,223 29,804 -1.9 % Ocean 49,692 18,498 168.6 % 141,304 51,217 175.9 % Air 18,137 9,046 100.5 % 55,107 28,496 93.4 % Customs 8,932 4,109 117.4 % 27,307 11,443 138.6 % Other logistics 16,070 13,087 22.8 % 50,348 42,029 19.8 % services Total 429,978 382,774 12.3 % 1,282,375 1,118,996 14.6 % transportation Sourcing 30,553 33,747 -9.5 % 101,151 105,895 -4.5 % Payment 2,775 16,149 -82.8 % 8,104 48,048 -83.1 % services Total net 463,306 432,670 7.1 % 1,391,630 1,272,939 9.3 % revenues Operating 286,951 245,413 16.9 % 864,093 731,223 18.2 % expenses Operating 176,355 187,257 -5.8 % 527,537 541,716 -2.6 % income Net income $ 107,737 $ 116,330 -7.4 % $ 322,952 $ 337,412 -4.3 % Diluted EPS $ 0.69 $ 0.72 -4.2 % $ 2.03 $ 2.08 -2.4 % Pro Forma Comparison - The following shows the effects of the disposition of the Company’s T-Chek Payment Services business (“T-Chek”), which was completed in October 2012, and the acquisition of Phoenix International Freight Services, Ltd. (“Phoenix”), which was completed in November 2012, as if these transactions had occurred at the beginning of 2012. A reconciliation of these pro forma measures is described on page 4. Three months ended September 30, Nine months ended September 30, 2013 2012 % 2013 2012 % Reported Pro Forma change Reported Pro Forma change Total net $ 463,306 $ 461,789 0.3 % $ 1,391,630 $ 1,358,849 2.4 % revenues Income from 176,355 190,233 -7.3 % 527,537 547,132 -3.6 % operations Discussion of Third Quarter 2013 Results Our truckload net revenues decreased 1.3 percent in the third quarter of 2013 compared to the third quarter of 2012. Our truckload volumes increased approximately 13 percent in the third quarter of 2013 compared to the third quarter of 2012. Our North American truckload volumes increased approximately nine percent. We estimate that our acquisition of Apreo Logistics S.A. (“Apreo”), which was completed in October 2012, contributed approximately four percent to our volume growth in the third quarter of 2013. Our truckload net revenue margin decreased in the third quarter of 2013 compared to the third quarter of 2012, due primarily to increased cost per mile. In North America, excluding the estimated impacts of the change in fuel, our average truckload rate per mile charged to our customers increased approximately two percent in the third quarter of 2013 compared to the third quarter of 2012. In North America, our truckload transportation costs increased approximately four percent, excluding the estimated impacts of the change in fuel. Our less-than-truckload (“LTL”) net revenues increased 4.4 percent in the third quarter of 2013 compared to the third quarter of 2012. The increase was driven by an increase in total shipments of approximately five percent, partially offset by decreased net revenue margin. Our intermodal net revenues increased 1.3 percent in the third quarter of 2013 compared to the third quarter of 2012. This was due to increased net revenue margin, partially offset by decreased volumes. Our net revenue margin increase was due to a change in our mix of business. Our ocean transportation net revenues increased 168.6 percent, our air transportation net revenues increased 100.5 percent, and our customs net revenues increased 117.4 percent in the third quarter of 2013 compared to the third quarter of 2012. These increases were primarily due to our acquisition of Phoenix in November 2012. Sourcing net revenues decreased 9.5 percent in the third quarter of 2013 compared to the third quarter of 2012. Cost of products sourced for resale increased as a result of lower crop yields primarily due to weather. We also lost certain commodity business with a significant customer. Our Payment Services net revenues decreased 82.8 percent in the third quarter of 2013 compared to the third quarter of 2012 due to the T-Chek divestiture in the fourth quarter of 2012. For the third quarter, operating expenses increased 16.9 percent to $287.0 million in 2013 from $245.4 million in 2012. Operating expenses as a percentage of net revenues increased to 61.9 percent in the third quarter of 2013 from 56.7 percent in 2012. During the third quarter of 2013, operating expenses grew faster than net revenues primarily as a result of an increase in headcount, including the impact of the Apreo and Phoenix acquisitions, and the amortization of acquisition-related intangible assets. Phoenix has a higher expense to net revenue ratio than C.H. Robinson has historically experienced. For the third quarter, personnel expenses increased 14.0 percent to $204.4 million in 2013 from $179.3 million in 2012. This was due to an increase in our average headcount of approximately 30 percent, related primarily to the acquisitions of the Phoenix and Apreo in the fourth quarter of 2012. We estimate that our average headcount, excluding acquisitions and divestitures, increased approximately eight percent in the third quarter of 2013 compared to 2012. The personnel expense increase was partially offset by declines in the expenses related to incentive plans that are designed to keep expenses variable with changes in net revenues and profitability. The increase in personnel expenses was also partially offset by the divestiture of T-Chek in October 2012. For the third quarter, other selling, general, and administrative expenses increased 25.0 percent to $82.6 million in 2013 from $66.1 million in 2012. This increase was driven primarily by Phoenix operations, partially offset by the divestiture of T-Chek. For the third quarter, acquisition amortization expense increased to $5.0 million in 2013 from $1.0 million in 2012 primarily as a result of the finite-lived intangible assets recorded in connection with the acquisition of Phoenix. Founded in 1905, C.H. Robinson Worldwide, Inc., is one of the largest non-asset based third party logistics companies in the world. C.H. Robinson is a global provider of multimodal transportation services and logistics solutions, currently serving over 42,000 active customers through a network of 285 offices in North America, South America, Europe, Asia, and Australia. C.H. Robinson maintains one of the largest networks of motor carrier capacity in North America and works with approximately 56,000 transportation providers worldwide. Except for the historical information contained herein, the matters set forth in this release are forward-looking statements that represent our expectations, beliefs, intentions or strategies concerning future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience or our present expectations, including, but not limited to such factors as changes in economic conditions, including uncertain consumer demand; changes in market demand and pressures on the pricing for our services; competition and growth rates within the third party logistics industry; freight levels and increasing costs and availability of truck capacity or alternative means of transporting freight, and changes in relationships with existing truck, rail, ocean and air carriers; changes in our customer base due to possible consolidation among our customers; our ability to integrate the operations of acquired companies with our historic operations successfully; risks associated with litigation and insurance coverage; risks associated with operations outside of the U.S.; risks associated with the potential impacts of changes in government regulations; risks associated with the produce industry, including food safety and contamination issues; fuel prices and availability; the impact of war on the economy; and other risks and uncertainties detailed in our Annual and Quarterly Reports. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update such statement to reflect events or circumstances arising after such date. All remarks made during our financial results conference call will be current at the time of the call and we undertake no obligation to update the replay. Non-GAAP vs. GAAP Financial and Pro Forma Financial Measures To assist investors in understanding our financial performance, we supplement the financial results that are generated in accordance with the accounting principles generally accepted in the United States, or GAAP, with non-GAAP financial measures from time to time. We use non-GAAP measures, including those set forth in this release, to assess our operating performance for the quarter. Management believes that these non-GAAP financial measures reflect an additional way of analyzing aspects of our ongoing operations that, when viewed with our GAAP results, provides a more complete understanding of the factors and trends affecting our business. However, non-GAAP results should not be regarded as a substitute for corresponding GAAP measures, and should be viewed in conjunction with our consolidated financial statements prepared in accordance with GAAP. To provide investors with information to assist them in assessing our financial results on a comparable basis with historical results, we have provided certain non-GAAP financial measures in this press release that include the effects of the disposition of T-Chek and the acquisition of Phoenix as if they had occurred at the beginning of our 2012 fiscal year. A reconciliation of our reported results to pro forma financial measures for the quarter ended September 30, 2012 is as follows (dollars in thousands): T-Chek Phoenix Reported Operations Operations Pro Forma ^(1) ^(1) Total revenues $ 2,880,409 $ (13,204 ) $ 216,219 $ 3,083,424 Purchased transportation 2,063,109 - 173,896 2,237,005 and related services Purchased products 384,630 - - 384,630 sourced for resale Total purchased services and 2,447,739 - 173,896 2,621,635 products Net revenues ^ 432,670 (13,204 ) 42,323 461,789 (2) Personnel 179,342 (3,470 ) 20,799 196,671 expenses Selling, general and 65,112 (2,855 ) 7,602 69,859 administrative expenses Amortization of acquisition 959 - 4,067 5,026 intangibles Total other operating 245,413 (6,325 ) 32,468 271,556 expenses Income from $ 187,257 $ (6,879 ) $ 9,855 $ 190,233 operations Adjustments have been made to historical Phoenix operations for the addition of amortization expense of finite-lived intangible assets recorded in connection with the acquisition ($4.1 million), rent expense for lease agreements entered into in connection with the acquisition ($84 thousand), and depreciation on a building acquired in the acquisition 1. ($37 thousand). An adjustment has also been made to reduce purchased transportation and related services ($7.3 million) and other selling, general, and administrative expenses ($13.5 million) and to increase personnel expenses ($20.8 million) to conform to C.H. Robinson’s historical financial reporting presentation. There were no pro forma adjustments to the T-Chek historical results. Net revenues are our total revenues less purchased transportation and 2. related services, including contracted motor carrier, rail, ocean, air, and other costs, and the purchased price and services related to the products we source. A reconciliation of our reported results to pro forma financial measures for the nine months ended September 30, 2012 is as follows (dollars in thousands): T-Chek Phoenix Reported Operations Operations Pro Forma ^(1) ^(1) Total revenues $ 8,388,237 $ (39,333 ) $ 622,827 $ 8,971,731 Purchased transportation 5,980,489 - 497,584 6,478,073 and related services Purchased products 1,134,809 - - 1,134,809 sourced for resale Total purchased services and 7,115,298 - 497,584 7,612,882 products Net revenues ^ 1,272,939 (39,333 ) 125,243 1,358,849 (2) Personnel 539,964 (11,176 ) 61,899 590,687 expenses Selling, general and 188,622 (8,781 ) 26,352 206,193 administrative expenses Amortization of acquisition 2,637 - 12,200 14,837 intangibles Total other operating 731,223 (19,957 ) 100,451 811,717 expenses Income from $ 541,716 $ (19,376 ) $ 24,792 $ 547,132 operations Adjustments have been made to historical Phoenix operations for addition of amortization expense of finite-lived intangible assets recorded in connection with the acquisition ($12.2 million), rent expense for lease agreements entered into in connection with the acquisition ($252 thousand), and depreciation on a building acquired in the acquisition 1. ($111 thousand). An adjustment has also been made for the elimination of contractual changes in compensation ($5.1 million). An adjustment has also been made to reduce purchased transportation and related services ($21.9 million) and other selling, general, and administrative expenses ($45.1 million) and to increase personnel expenses ($67.0 million) to conform to C.H. Robinson’s historical financial reporting presentation. There were no pro forma adjustments to the T-Chek historical results. Net revenues are our total revenues less purchased transportation and 2. related services, including contracted motor carrier, rail, ocean, air, and other costs, and the purchased price and services related to the products we source. Conference Call Information: C.H. Robinson Worldwide Third Quarter 2013 Earnings Conference Call Wednesday November 6, 2013 8:30 a.m. Eastern Time The call will be limited to 60 minutes, including questions and answers. We invite call participants to submit questions in advance of the conference call and we will respond to as many of the questions as we can in the time allowed. If time permits, we will accept live questions. To submit your question(s) in advance of the call, please email email@example.com. Presentation slides and a simultaneous live audio webcast of the conference call may be accessed through the Investor Relations link on C.H. Robinson’s website at www.chrobinson.com To participate in the conference call by telephone, please call ten minutes early by dialing: 877-941-0844 Callers should reference the conference ID, which is 464248# Webcast replay available through Investor Relations link at www.chrobinson.com Telephone audio replay available until 12:59 a.m. Eastern Time on November 9: 800-406-7325; passcode: 4642488# CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited, in thousands, except per share data) Three months ended Nine months ended September 30, September 30, 2013 2012 2013 2012 Revenues: Transportation $ 2,880,901 $ 2,445,883 $ 8,302,160 $ 7,099,485 Sourcing 432,373 418,377 1,287,036 1,240,704 Payment 3,391 16,149 9,998 48,048 Services Total revenues 3,316,665 2,880,409 9,599,194 8,388,237 Costs and expenses: Purchased transportation 2,450,923 2,063,109 7,019,785 5,980,489 and related services Purchased products 401,820 384,630 1,185,885 1,134,809 sourced for resale Purchased payment 616 - 1,894 - services Personnel 204,388 179,342 623,042 539,964 expenses Other selling, general, and 82,563 66,071 241,051 191,259 administrative expenses Total costs 3,140,310 2,693,152 9,071,657 7,846,521 and expenses Income from 176,355 187,257 527,537 541,716 operations Investment, interest, and other (2,635 ) 76 (3,284 ) 976 (expense) income Income before provision for 173,720 187,333 524,253 542,692 income taxes Provision for 65,983 71,003 201,301 205,280 income taxes Net income $ 107,737 $ 116,330 $ 322,952 $ 337,412 Net income per $ 0.69 $ 0.72 $ 2.03 $ 2.09 share (basic) Net income per share $ 0.69 $ 0.72 $ 2.03 $ 2.08 (diluted) Weighted average shares 156,924 160,782 158,820 161,784 outstanding (basic) Weighted average shares 157,044 161,003 158,884 162,042 outstanding (diluted) CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands) September 30, December 31, 2013 2012 Assets Current assets: Cash and cash equivalents $ 129,723 $ 210,019 Receivables, net 1,564,997 1,412,136 Other current assets 58,721 50,135 Total current assets 1,753,441 1,672,290 Property and equipment, net 155,693 149,851 Intangible and other assets 982,434 982,084 Total Assets $ 2,891,568 $ 2,804,225 Liabilities and stockholders’ investment Current liabilities: Accounts payable and outstanding checks $ 810,742 $ 707,476 Accrued compensation 79,770 103,343 Accrued income taxes 23,899 121,581 Other accrued expenses 41,820 46,171 Current portion of debt 350,000 253,646 Total current liabilities 1,306,231 1,232,217 Noncurrent income taxes payable 21,196 20,590 Deferred tax liabilities 74,691 45,113 Long-term debt 500,000 - Other long term liabilities 887 1,933 Total liabilities 1,903,005 1,299,853 Total stockholders’ investment 988,563 1,504,372 Total liabilities and stockholders’ $ 2,891,568 $ 2,804,225 investment CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited, in thousands, except operational data) Nine months ended September 30, 2013 2012 Operating activities: Net income $ 322,952 $ 337,412 Stock-based compensation 10,856 21,077 Depreciation and amortization 42,052 26,081 Provision for doubtful accounts 10,323 8,143 Deferred income taxes 28,696 3,856 Other 232 2,490 Changes in operating elements Receivables (197,468 ) (203,361 ) Prepaid expenses and other (10,465 ) (2,042 ) Accounts payable and outstanding checks 103,226 111,628 Accrued compensation (23,023 ) (28,230 ) Accrued income taxes (94,027 ) 689 Other accrued liabilities (10,425 ) (10,587 ) Net cash provided by operating activities 182,929 267,156 Investing activities: Purchases of property and equipment (27,861 ) (28,096 ) Purchases and development of software (6,375 ) (10,795 ) Acquisitions, net of cash 19,126 - Other 221 206 Net cash used for investing activities (14,889 ) (38,685 ) Financing activities: Borrowings on line of credit 3,054,023 - Repayments on line of credit (2,957,669 ) - Borrowings of long-term debt 500,000 - Payment of contingent purchase price (927 ) (11,613 ) Net repurchases of common stock (700,631 ) (163,412 ) Excess tax benefit on stock-based 26,180 9,831 compensation Cash dividends (167,130 ) (163,273 ) Net cash used for financing activities (246,154 ) (328,467 ) Effect of exchange rates on cash (2,182 ) (718 ) Net change in cash and cash equivalents (80,296 ) (100,714 ) Cash and cash equivalents, beginning of 210,019 373,669 period Cash and cash equivalents, end of period $ 129,723 $ 272,955 As of September 30, 2013 2012 Operational Data: Employees 11,533 8,811 Branches 285 234 Contact: C.H. Robinson Worldwide, Inc. Chad Lindbloom, 952-937-7779 chief financial officer or Tim Gagnon, 952-683-5007 director, investor relations
C.H. Robinson Reports Third Quarter Results
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